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Managing student properties is no easy task, with student landlords often required to juggle multiple responsibilities. While it can certainly be a full-time job, it can also be very rewarding both financially and in terms of the satisfaction that comes from performing the job well.
Many students are living away from home for the first time and depend on their landlord to provide a safe and comfortable living environment and a fair and transparent rental service. For many students, their landlord plays a significant role in their transition to independent living!
However, student landlords are obligated to remain knowledgeable of and compliant with numerous student landlord laws and regulations at all times. These regulations help you provide a fair and transparent service to your tenants.
One such law is the Tenant Fees Act 2019, which regulates what landlords can and cannot charge tenants for. Sticking to these rules can help you to maintain a positive landlord-tenant relationship and protect you from committing an offence and receiving a financial penalty.
In this article, we will explain more about the Tenant Fees Act, the fees that landlords are permitted to charge student tenants, and the consequences of non-compliance.
What is the Tenant Fees Act 2019?
To understand what fees you can legally charge your student tenants, you must first ensure you have a sound understanding of the Tenant Fees Act 2019.
The Tenant Fees Act is a very important piece of legislation that the government introduced on 1st June 2019. It was introduced to regulate the fees that landlords can charge to protect tenants from excessive or unnecessary fees and create a fairer, more affordable, and transparent private rental market. This is achieved by restricting the fees that landlords can charge tenants to a list of ‘permitted’ fees and prohibiting all others. The Act also placed a cap on the amount landlords can charge for holding and tenancy deposits. Any landlords in breach of the Tenant Fees Act will be fined.
The Tenant Fees Act applies to all private landlords, not just student landlords, and protects all tenants in England living in privately rented accommodation, including students renting a room on a licence, and lodgers sharing accommodation with a private landlord.
What Fees Did the Tenant Fees Act 2019 Ban Landlords from Charging Student Tenants?
Ensuring compliance with the Tenant Fees Act 2019 is vital for landlords, as charging tenants prohibited fees can result in strict financial penalties.
The Act bans landlords from charging fees that do not appear on a permitted list. Some common fees that landlords used to charge tenants for that are now against the law include the following:
- Property viewing fees
- Reference check fees
- Credit check fees
- Guarantor form fees
- Inventory fees
- Admin fees
- Check-in/check-out fees
- Compulsory professional cleaning
- Gardening services
- Chimney sweeping services
- Renewal fees
What Fees can Student Landlords Legally Charge Students?
Whether you’re an experienced landlord or investing in your first student property, figuring out what fees you can and can’t charge your tenants is complex and getting it right is crucial to your investment’s success.
You must ensure you are fully informed about which fees and charges you can enforce and which are prohibited to keep you on the right side of the law and maintain good relations with your tenants.
This section will clarify the different fees you can charge, from rent and tenancy deposits to charges for late payments and property damage.
Don’t forget that all applicable fees should be detailed in the tenancy agreement to provide clarity and transparency from the start. The tenancy agreement also plays a vital part in protecting both parties if any disputes over fees or charges occur later.
Rent
Charging rent is, of course, a given. However, the amount of rent charged should be equal throughout the year. Landlords cannot give tenants an agreement that charges more during the tenancy’s first month(s) before dropping the amount down. If you want the option to review rent partway through a tenancy, you need to ensure you have included a rent review clause in the tenancy agreement. This clause allows landlords to reduce or increase the rent during a tenancy without breaching the Tenant Fees Act 2019. If your student tenant cannot provide a suitable guarantor or reference check, you are also permitted to request that they pay rent upfront in a lump sum to provide you with financial security.
Tenancy Deposit
Student landlords charge tenants a refundable tenancy deposit to provide them with financial protection and security if a tenant stops paying rent or causes damage to their property. Since the Tenancy Deposit Scheme was introduced in 2007, landlords have been legally required to place all tenant deposits into a government-approved TDP scheme within 30 days of receiving them.
The amount that landlords can charge for a deposit is capped at the equivalent of 5 weeks’ rent where annual rent is less than £50,000 or 6 weeks’ rent where annual rent is £50,000 or above (so five weeks’ rent for your average student!). If your student tenants have a joint tenancy, then liability for the tenancy deposit is spread across everyone named on the tenancy agreement. The deposit cap for joint tenancies usually equals the total weekly rent for the property. You may claim a deduction from a tenant’s deposit to cover any costs you have incurred due to the tenant breaching the rules of the tenancy agreement.
Bills
Organising utilities, TV licences, internet, and multiple direct debits can be a pain, especially for students living away from home for the first time. Because of this, many student landlords charge rent that is all-inclusive of bills to make their property more appealing to students. If you do pay these additional bills for your tenants, whether that’s included with rent or as a separate payment, you cannot overcharge students for these bills.
Holding Deposit
A holding deposit is a refundable payment which a landlord can ask a tenant to pay to reserve the property whilst reference checks are being carried out.
Landlords cannot request a holding deposit totalling more than one week’s rent for the property. For properties with multiple tenants who will all be jointly liable for the agreement, the total amount should be split three ways; it cannot be charged three times.
Before taking the deposit, you should provide student tenants with clear information about the circumstances under which they may lose the deposit and when it will be returned. Some landlords retain the deposit to contribute towards the tenancy deposit or first month’s rent. If you would like to do this, you must first obtain the tenant’s consent.
Landlords can retain a holding deposit for the following reasons:
- Tenant fails the Right to Rent check.
- Tenant has provided false or misleading information.
- Tenant fails to take reasonable steps to enter into an agreement.
- Tenant withdraws from the property (unless they have done so because of unreasonable behaviour by the landlord).
Once you have received the holding deposit, you should stop advertising the property.
Fees for Ending a Student Tenancy Early
Your student tenants are liable to pay rent until the end of their fixed-term agreement. If one of your tenants decides to end their tenancy early, you may charge them for this to recoup the losses it would otherwise cause you. It is reasonable to ask the tenant to pay rent until a replacement tenant is found. The amount you charge them should not exceed the loss in rent incurred by them leaving.
Fees for Amending a Student Tenancy
If a tenant requests a reasonable change to a tenancy agreement, you should accommodate this where possible. Reasonable changes could include keeping a pet at the property or swapping tenants in a joint tenancy. You can charge tenants for any costs incurred by changing the tenancy agreement. As standard, you can charge a maximum of £50 (inc. VAT) for the change. If the costs you incur are higher than this, you must be able to provide evidence of the costs, usually in the form of receipts or invoices.
Fees for Late Payment of Rent
Students are usually reliable at paying their rent; many pay it in a lump sum as soon as their student loan comes in to make budgeting easier. However, if your tenant is late paying their rent, you cannot charge them a late fee until the payment has been outstanding for 14 days or more. At this point, you can begin charging the student interest on the late payment, but the amount you can charge is capped at no more than an annual percentage rate of 3% above the Bank of England base rate for each day that the payment is outstanding. Fixed penalty charges for late payment of rent are not allowed.
Fees for Lost Keys or Security Devices
Lost keys are a common occurrence among student tenants. Landlords can charge student tenants for replacing the key or security device. You should give your tenant proof of the cost, usually as a receipt. They are not obligated to pay the fee until they have seen this evidence.
Damage to Student Property Rentals
If your student tenants cause damage to your property, then you may be able to charge for the damage through breach of contract. Depending on the circumstances and details of the damage, you may be able to recover the costs required to return the property to the same condition that it was at the start of the tenancy. These costs are often recovered by claiming against the tenancy deposit. Damages can only be claimed if they result from a breach of contract, and fair wear and tear should be considered.
What are the Penalties for Breaching the Tenant Fees Act?
Landlords should note that compliance is not optional, and non-compliance could have serious implications.
Charging tenants fees that don’t appear on the ‘permitted fees’ list is against the law. Breaching the Tenant Fees Act is usually deemed to be a civil offence. Landlords found to be in breach could be charged a financial penalty of up to £5000 for each illegal fee they have charged their tenant.
If landlords breach the Act again within five years of the first offence, then it becomes a criminal offence, the penalty for which is an unlimited fine and a banning order offence under the Housing and Planning Act 2016.
Once you’ve read and thoroughly digested the contents of the Tenant Fees Act, compliance becomes quite straightforward. Sticking to the rules helps to safeguard your financial investment and promotes harmonious relationships with your tenants. As a student landlord, your service significantly shapes the student experience. Therefore, taking your obligations seriously and ensuring compliance with the Tenant Fees Act will help you to deliver a fair, transparent, and positive rental experience for your tenants.
